In a recent Court of Appeal case, the relationship between no oral modification (NOM) and entire agreement clauses was discussed. The appeal in this case considered the provision of dental services.
Typically, if a NOM clause exists in a contract, parties to that contract are only permitted to vary its terms in writing. Oral amendments are invalid and will not form part of the contract.
The NHS Commissioning Board (NHS England) and Vasant (Dentists) had entered into two contracts. The case looked at whether one of the contracts had been varied validly. In 2006 the first contract was agreed and this made provision for general dental services (GDS contract). Most importantly, this contract included:
- A NOM clause dictating that in order to vary the contract it must be in writing and signed by the parties
- An entire agreement clause asserting that the contract superseded all previous agreements and, therefore, created an entire agreement between parties
The parties then entered into an additional, and separate, fixed-term contract which provided for intermediate minor oral surgery services (IMOS contract). When this expired, its provisions were continued in practice. At this point, the agreements in place were completely clear. However, NHS England and Vasant signed a contract variation agreement form (VAF) in 2009. The VAF declared that the IMOS services would be brought within the scope of the GDS contract.
Things became complicated in 2016 when NHS England contacted the Dentists to terminate the IMOS contract. It needed to be established which contract was in force: the varied GDS contract, or the IMOS contract. If the GDS contract was in force, NHS England had no right to terminate the contract in the absence of default by the Dentists but if the IMOS contract was in force, NHS England could terminate with just one month’s notice.
The NHS argued that the IMOS contract continued in force, entitling them to terminate. They took the view that the VAF failed for uncertainty as:
- It referred vaguely to ‘an intermediate minor oral surgery service’ to be carried out as ‘further services’ within the scope of the GDS contract; and
- It did not make explicit reference to the particular IMOS services nor terms of payment.
The Dentists, on the other hand, argued that the VAF was a valid variation to the GDS contract and, therefore, NHS England were not entitled to terminate the contract as the Dentist’s had not defaulted.
The Court of Appeal held that the VAF was valid, agreeing with the Dentists. This meant that the IMOS services were to be carried out as ‘further services’ under the GDS contract and that the NHS could not terminate the IMOS contract. It was considered that the apparent ambiguity as to the meaning of ‘an intermediate minor oral surgery service’ was well-understood by the parties and therefore not a reason to fail the VAF.
While the case concerns quite a niche dental services contract, the case provides useful reminders to those seeking to amend complex contracts. Amendments must be made in accordance with the requirements of the contract. It may be worth considering drafting a new contract that amalgamates elements of the existing contract with the new desired terms to ensure there is a contract that captures everything that the parties intend.